In 1970, Congress passed the Rail Passenger Service Act to relieve the freight railroad industry from the burden of providing ongoing passenger service and to ensure that intercity passenger rail service would continue to be a part of the national transportation system. Since 1971, Amtrak, the national rail passenger corporation, has received $20 billion in federal funding to help cover its operating and capital losses.

Despite initial financial improvements in early 1995, the gap between Amtrak's operating deficits and operating subsidies began to grow again in 1996 and that gap continues to widen. Amtrak has been borrowing money to pay operating costs ($83 million in bank loans in FY97). Further, Amtrak's debt level has grown significantly over recent years. Amtrak is about $1 billion in debt and its debt load is projected to double to over $2 billion by 1999 to cover the money borrowed to finance high-speed trains for the Northeast Corridor, maintenance facilities and new locomotives.

The Committee is concerned that Amtrak's federal capital grant is being used increasingly for payments other than general capital needs. For example, in FY 1997, only $12 million of the $223 million capital grant is expected to be available for general capital needs. The rest will be used for debt payments ($75 million), equipment overhauls ($110 million), and legally mandated work ($26 million). Even if the funding levels in this bill are appropriated, a substantial cash shortfall is still projected by Amtrak in the amount of $66 million in FY 1997; $118 million FY 1998; $180 million FY 1999; and $51 million FY 2000.

S. 738 was introduced by Senator Hutchison on May 14, 1997, and cosponsored by Senators Snowe, Roth, Roberts, and Chafee. It would reauthorize Amtrak for five years and provide the statutory reforms and funding levels requested by Amtrak to allow it to operate more like a business.

• Authorizations: The bill would authorize appropriations over five years as follows: $1.138 billion for FY 1998; $1.058 billion for FY 1999; $1.023 billion for FY 2000; $989 million for FY 2001; and $955 million for FY 2002. These levels are the funding levels requested by Amtrak and assume the equivalent of one-half cent per gallon of motor fuels taxes for capital expenditures, as well as funds for operating and excess railroad retirement payments.
• Operational Reforms: Amtrak would be directed to strive to operate as a national rail passenger system which provides access to all areas of the country and ties together existing and emerging corridors. The bill repeals the prohibition against other companies from operating intercity passenger service over an Amtrak route unless Amtrak gives consent. Amtrak's required notification period regarding any proposed discontinuances of a route would be extended from 90 days to 180 days in order to give states adequate time to share or assume the cost of retaining a route. Amtrak would be allowed to contract for intercity bus service when passengers will move by rail immediately before or after bus travel.
• Procurement Reforms: Under current law, Amtrak is prohibited from contracting out any work, other than for food and beverage services, if such action would result in the loss of even one job. As requested by Amtrak, the bill would repeal that prohibition and provide for an accelerated bargaining schedule to allow labor and management to resolve contracting out issues through a nonbinding arbitration process prior to the ban's repeal.
• Labor Reforms: S. 738 repeals current law that requires Amtrak to provide up to six years of pay for any employee laid off because of a service discontinuance. The Committee replaces the mandatory six-year severance pay with a requirement that Amtrak negotiate severance pay issues with its rail workers. The bill requires accelerated bargaining procedures within a 180-day timeframe.
• Liability Reforms. S. 738 would permit Amtrak to enter into "contracts" with its passengers through ticket purchases to limit claims related to rail passenger transportation to no less than the limits established by the Committee-passed product liability reform legislation (i.e., punitive damages, where permitted, equal to two times compensatory damages or $250,000, whichever is greater). Also, the bill clarifies that indemnification agreements related to the provision of rail passenger service entered into by Amtrak and other parties would be enforceable. Amtrak and the freight railroads want legislation to confirm enforceability of the indemnification agreements they have entered into regarding operation over each other's rail lines, notwithstanding allegations of gross negligence by a freight railroad or Amtrak.
• Amtrak Reform Council: The bill creates a nine-member Amtrak Reform Council (ARC), to monitor Amtrak's progress in meeting its financial goals. The Council would be directed to evaluate Amtrak's performance and make recommendations to Amtrak for further cost containment, productivity improvements, and financial reforms. The Council must submit an annual report to Congress.
• Sunset Trigger: S. 738 establishes a mechanism to be implemented if at any time following two years after the date of enactment the Council finds that Amtrak is not meeting its financial goals. If such a finding is made, the Council must develop and submit to Congress within 90 days an action plan for a "restructured and rationalized" intercity rail passenger system. Within that same time period, Amtrak would be directed to prepare a plan for its complete liquidation. The liquidation plan would be reviewed by the GAO and the Inspector General of the Department of Transportation. If Congress does not approve legislation to provide for a restructured intercity rail passenger system within 90 days, Amtrak would be required to implement the liquidation plan. In report language, the Committee clarifies that if the Council determines that Amtrak is failing, the bill does not require the Council's proposed restructuring plan to be approved without the opportunity for Congress to change the plan or consider alternative approaches.
• Financial Goals: Amtrak is directed to prepare a financial plan to operate within the funding levels authorized, setting budgetary goals for FY's 1998-2002.
• Independent Assessment: S. 738 would require an independent assessment of Amtrak's financial requirements through FY 2002, similar to the audit required in the Federal Aviation Reauthorization Act of 1996. The Inspector General of the Department of Transportation would be directed to oversee the independent assessment to be completed within 180 days after the bill's enactment. The Committee expects the audit to cover Amtrak's cost allocation process and procedures, expenses related to intercity service, commuter service and any other service provided by Amtrak; Amtrak's strategic business plan, including projected expenses, capital needs, ridership and revenue forecasts; and Amtrak's debt obligations.
• Report to Congress: Due to concern about a potential Amtrak bankruptcy, the Commitee bill directs the Comptroller General to immediately conduct an analysis on this potential situation and submit a report to Congress. The Committee requests an overview of the financial issues and implications associated with an Amtrak liquidation, including an analysis of the implications of such a liquidation on the federal government, Amtrak's creditors, and the Railroad retirement system.

CBO's estimated outlays, based on the yearly authorization levels specified by the bill, are as follows: $886 million for FY 1997; $1.051 billion for FY 1998; $1.166 billion for FY 1999; $1.039 billion for FY 2000; $979 million for FY 2001; and $945 million for FY 2002.

Manager's Amendment. The amendment includes the following changes to S. 738: